HR and side hustles: should we rethink employment contracts?

If a worker’s side business isn’t in direct competition with their full-time job and isn’t operated during work hours, it might actually add value to an employer.

While the idea of having a side hustle was once reserved for the Silicon Valley tech-guru, it’s estimated that a quarter of people in Australia currently do something else on the side of their day job and 80 per cent are hoping to, according to a report from the National Broadband Network (nbn) and The School of Life.

As this form of working gains momentum, employers might feel inclined to protect against potential pitfalls by contractually forbidding employees from pursuing a passion project, but there’s a case for why they shouldn’t.

Sixty-nine per cent of people in a survey sample in the UK reported feeling “more positive about life” when working in both their full-time role and side hustle, and 47 per cent said they’d stay with their current employer even if their business took off.

These statistics come from a whitepaper developed by Henley Business School in the UK, titled ‘The Side Hustle Economy’ which utilised data from interviews with top level HR executives, experts, and surveys of both business leaders and employees.

Hustling into the future of work

AHRI board member and former chief people officer at KFC Rob Phipps recently spoke to In The Black. “How do employers work out a way to protect themselves, but also give employees some ability to do the things that they want to do, as long as they’re not in conflict?”

“How are we setting up our organisations for the future, because this type of thing is just getting started? I think it’s going to happen more and more,” says Phipps.

Phipps is right that this type of work is only growing in popularity. The Henley whitepaper shows that 80 per cent of surveyed UK businesses think the traditional nine-to-five job is no longer the common approach to working. And, in Australia, workers are increasingly looking for personal fulfilment outside of their jobs, as shown by the infographic below.

Source: nbn Side Hustle report

So there are a few good reasons some employers consider changing their employment contracts to adjust to this. For starters, in certain roles having ambitious, driven and creative employees – the type who are likely to pursue their own venture – can only be a good thing. The Henley paper reports 47 per cent of employers believe that allowing side-hustling attracts the best talent.

Another reason employers should be taking notice is because Australian employees are expressing their desire to move beyond the confines of a nine-to-five job and employers that support this desire are likely to lure in the best talent.

The nbn report breaks down the appetite for a side hustle into states, with 88 per cent of ACT residents looking for fulfilment outside of work and two thirds of South Australian residents wanting to pursue a passion project. In Western Australia a strong portion (71 per cent) of people expressed the desire to be their own boss, and 38 per cent of Queenslanders feel they’ve identified a gap in the market for a specific service they could provide.

Tjänstledighet leave

Unicorn companies have previously allocated what’s referred to as the ‘20 per cent time’ policy, whereby employees of these elite establishments can use up to 20 per cent of their work time to pursue a project that has the potential to drive the business forward. While there’s debate around how effective and realistic this policy is in the bustling workplace of today, it has previously been shown to pay off. Gmail was spawned from such a policy.

The adage ‘don’t quit your day job’ mightn’t concern many Swedish employees pursuing their side hustles because their workplace focus on entrepreneurship is taken to the next level. In Sweden companies allow their full-time employees to take six months of unpaid ‘tjänstledighet’ leave to try their hand at getting a business up and running under the Right to Leave to Conduct a Business Operation Act.

It’s something of a workplace rumspringa; employees can go out into the world, trial a business venture and if it doesn’t work out they’ve got a job to return to.

There are a few conditions however. Workers must have been employed for up to six months before qualifying for tjänstledighet leave, they mustn’t set up a company in direct competition with their employer, and leave can only be taken once per employer. Swedish employers are only allowed to deny a tjänstledighet request if the employee is integral to the operation of the business.

This approach, which was introduced 1998, seems to be working. Over the last decade, the number of registered businesses in Sweden has doubled, with well-known ventures like Spotify and Minecraft among them.

The legal landscape

Even if a contract prohibits an employee’s involvement with another business, employers need to ensure they take the appropriate steps during the dismissal stages if they believe the employee has breached their contract.

In a 2018 FWC decision, employee Abigail Jackman was found to have been unfairly dismissed from cabinetry hardware importer Lek Supply, with commissioner Sarah McKinnon citing the employer’s procedural wrongdoings as an appropriate reason to reinstate Jackman.

Jackman was terminated when her employer discovered that she was utilising work hours to take phone calls relating to her own business of selling bath products and had made a mistake in her full-time role due to the distraction. While commissioner McKinnon noted the reason for termination was reasonable, the way in which the employer dismissed her was not.

The FWC decision found Jackman was not informed of the reason for a meeting that occured prior to her termination and was not given the opportunity to adequately respond to the allegations made against her.

“It was a disproportionate response to a valid concern, which had only recently become apparent. A warning would have been a more appropriate response,” says commissioner McKinnon.

Michael Byrnes, partner at Swaab law firm, says “a clause prohibiting secondary employment or an employee conducting a side business is common (although by no means universal) in employment contracts. Most of these clauses include a mechanism whereby an employee can seek approval from the employer to engage in such activities.”

Byrnes’ advice to employers is to consider including a clause in employment contracts, or create an enforceable policy dealing with side businesses. It should:

Prohibit any conduct in direct or indirect competition with the business of the employer;

Require consent (not to be unreasonably withheld) from the employer for the conduct of side business;

Prohibit (or at least limit) any use of company resources for the side business;

Specifically confirm obligations relating to confidential information owed to the employer when conducting the side business;

Prohibit the use of the employee’s work email account or position when conducting the side business; and

Establish sensible limits and protocols for use of technology and social media by the employee for the promotion of the side business during business hours.

Side hustlers

Lewis works for a billion dollar Australian company and when he’s off the clock, he dedicates his time to his passion project: a business that makes and sells cold drip coffee. He has various stipulations in his contract around side businesses but says that he’s managed that by having personal conversations with his leadership team.

“There are a tonne of great learnings that come from running your own side project that can be applied back into your day job. Ultimately, it’s all about work and life balance. I see no difference between spending your time outside of work on a side business to playing a sport,” he says.

He says having something to work on out of hours is a good outlet for his creativity and improves his mental wellbeing.

“You learn a whole heap of new skills and practices that could potentially be applied to your full time employers benefit….If a company is really concerned about losing you as a potential employee to your side hustle, I imagine they’re not really looking after your best interests anyway.”

Byrnes adds that employers will sometimes welcome an employee with a side hustle.

“This is particularly so where the employer’s business is in the early stage of its life cycle where the business acumen, entrepreneurship and general commercial experience gained in the conduct of the side business can be applied by the employee to the business of the employer.

“Employers in the professional services industry often welcome their employees becoming directors of other organisations as it can provide a source of work as well as enhancing the reputation, standing and experience of the employees involved which, by association, benefits the professional services employer.”

How does your company manage side hustles? Share your thoughts in the comment section below.

Get the skills and understanding to develop and implement HR policies that are relevant, clear and effective in your organisation, with the AHRI short course Develop and implement HR policies.

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Pamela Frost

Having worked in talent management, career enrichment and capability assessment for 20 years I know many people who are out-of-flow, disengaged & disenfranchised. A solution is job crafting. But so few organisations take it up. WHY – because they like to control effort and task performance and minimise discretion. Upwork, a global moonlighting site does not have employment contracts specifying when / how the work is done. They simply pay on delivery. Take heed of trends?

HR and side hustles: should we rethink employment contracts?

If a worker’s side business isn’t in direct competition with their full-time job and isn’t operated during work hours, it might actually add value to an employer.

While the idea of having a side hustle was once reserved for the Silicon Valley tech-guru, it’s estimated that a quarter of people in Australia currently do something else on the side of their day job and 80 per cent are hoping to, according to a report from the National Broadband Network (nbn) and The School of Life.

As this form of working gains momentum, employers might feel inclined to protect against potential pitfalls by contractually forbidding employees from pursuing a passion project, but there’s a case for why they shouldn’t.

Sixty-nine per cent of people in a survey sample in the UK reported feeling “more positive about life” when working in both their full-time role and side hustle, and 47 per cent said they’d stay with their current employer even if their business took off.

These statistics come from a whitepaper developed by Henley Business School in the UK, titled ‘The Side Hustle Economy’ which utilised data from interviews with top level HR executives, experts, and surveys of both business leaders and employees.

Hustling into the future of work

AHRI board member and former chief people officer at KFC Rob Phipps recently spoke to In The Black. “How do employers work out a way to protect themselves, but also give employees some ability to do the things that they want to do, as long as they’re not in conflict?”

“How are we setting up our organisations for the future, because this type of thing is just getting started? I think it’s going to happen more and more,” says Phipps.

Phipps is right that this type of work is only growing in popularity. The Henley whitepaper shows that 80 per cent of surveyed UK businesses think the traditional nine-to-five job is no longer the common approach to working. And, in Australia, workers are increasingly looking for personal fulfilment outside of their jobs, as shown by the infographic below.

Source: nbn Side Hustle report

So there are a few good reasons some employers consider changing their employment contracts to adjust to this. For starters, in certain roles having ambitious, driven and creative employees – the type who are likely to pursue their own venture – can only be a good thing. The Henley paper reports 47 per cent of employers believe that allowing side-hustling attracts the best talent.

Another reason employers should be taking notice is because Australian employees are expressing their desire to move beyond the confines of a nine-to-five job and employers that support this desire are likely to lure in the best talent.

The nbn report breaks down the appetite for a side hustle into states, with 88 per cent of ACT residents looking for fulfilment outside of work and two thirds of South Australian residents wanting to pursue a passion project. In Western Australia a strong portion (71 per cent) of people expressed the desire to be their own boss, and 38 per cent of Queenslanders feel they’ve identified a gap in the market for a specific service they could provide.

Tjänstledighet leave

Unicorn companies have previously allocated what’s referred to as the ‘20 per cent time’ policy, whereby employees of these elite establishments can use up to 20 per cent of their work time to pursue a project that has the potential to drive the business forward. While there’s debate around how effective and realistic this policy is in the bustling workplace of today, it has previously been shown to pay off. Gmail was spawned from such a policy.

The adage ‘don’t quit your day job’ mightn’t concern many Swedish employees pursuing their side hustles because their workplace focus on entrepreneurship is taken to the next level. In Sweden companies allow their full-time employees to take six months of unpaid ‘tjänstledighet’ leave to try their hand at getting a business up and running under the Right to Leave to Conduct a Business Operation Act.

It’s something of a workplace rumspringa; employees can go out into the world, trial a business venture and if it doesn’t work out they’ve got a job to return to.

There are a few conditions however. Workers must have been employed for up to six months before qualifying for tjänstledighet leave, they mustn’t set up a company in direct competition with their employer, and leave can only be taken once per employer. Swedish employers are only allowed to deny a tjänstledighet request if the employee is integral to the operation of the business.

This approach, which was introduced 1998, seems to be working. Over the last decade, the number of registered businesses in Sweden has doubled, with well-known ventures like Spotify and Minecraft among them.

The legal landscape

Even if a contract prohibits an employee’s involvement with another business, employers need to ensure they take the appropriate steps during the dismissal stages if they believe the employee has breached their contract.

In a 2018 FWC decision, employee Abigail Jackman was found to have been unfairly dismissed from cabinetry hardware importer Lek Supply, with commissioner Sarah McKinnon citing the employer’s procedural wrongdoings as an appropriate reason to reinstate Jackman.

Jackman was terminated when her employer discovered that she was utilising work hours to take phone calls relating to her own business of selling bath products and had made a mistake in her full-time role due to the distraction. While commissioner McKinnon noted the reason for termination was reasonable, the way in which the employer dismissed her was not.

The FWC decision found Jackman was not informed of the reason for a meeting that occured prior to her termination and was not given the opportunity to adequately respond to the allegations made against her.

“It was a disproportionate response to a valid concern, which had only recently become apparent. A warning would have been a more appropriate response,” says commissioner McKinnon.

Michael Byrnes, partner at Swaab law firm, says “a clause prohibiting secondary employment or an employee conducting a side business is common (although by no means universal) in employment contracts. Most of these clauses include a mechanism whereby an employee can seek approval from the employer to engage in such activities.”

Byrnes’ advice to employers is to consider including a clause in employment contracts, or create an enforceable policy dealing with side businesses. It should:

Prohibit any conduct in direct or indirect competition with the business of the employer;

Require consent (not to be unreasonably withheld) from the employer for the conduct of side business;

Prohibit (or at least limit) any use of company resources for the side business;

Specifically confirm obligations relating to confidential information owed to the employer when conducting the side business;

Prohibit the use of the employee’s work email account or position when conducting the side business; and

Establish sensible limits and protocols for use of technology and social media by the employee for the promotion of the side business during business hours.

Side hustlers

Lewis works for a billion dollar Australian company and when he’s off the clock, he dedicates his time to his passion project: a business that makes and sells cold drip coffee. He has various stipulations in his contract around side businesses but says that he’s managed that by having personal conversations with his leadership team.

“There are a tonne of great learnings that come from running your own side project that can be applied back into your day job. Ultimately, it’s all about work and life balance. I see no difference between spending your time outside of work on a side business to playing a sport,” he says.

He says having something to work on out of hours is a good outlet for his creativity and improves his mental wellbeing.

“You learn a whole heap of new skills and practices that could potentially be applied to your full time employers benefit….If a company is really concerned about losing you as a potential employee to your side hustle, I imagine they’re not really looking after your best interests anyway.”

Byrnes adds that employers will sometimes welcome an employee with a side hustle.

“This is particularly so where the employer’s business is in the early stage of its life cycle where the business acumen, entrepreneurship and general commercial experience gained in the conduct of the side business can be applied by the employee to the business of the employer.

“Employers in the professional services industry often welcome their employees becoming directors of other organisations as it can provide a source of work as well as enhancing the reputation, standing and experience of the employees involved which, by association, benefits the professional services employer.”

How does your company manage side hustles? Share your thoughts in the comment section below.

Get the skills and understanding to develop and implement HR policies that are relevant, clear and effective in your organisation, with the AHRI short course Develop and implement HR policies.

1

Leave a reply

500

500

Subscribe to receive comments

Notify me of

Guest

Pamela Frost

Having worked in talent management, career enrichment and capability assessment for 20 years I know many people who are out-of-flow, disengaged & disenfranchised. A solution is job crafting. But so few organisations take it up. WHY – because they like to control effort and task performance and minimise discretion. Upwork, a global moonlighting site does not have employment contracts specifying when / how the work is done. They simply pay on delivery. Take heed of trends?